China-US Trade War Disrupts Global EV Industry: A Shift in Supply Chains and Market Dynamics

US-China trade war disrupts global EV industry, reshaping supply chains and production.

The ongoing trade conflict between the United States and China, reignited in 2025, has sent shockwaves through the electric vehicle (EV) industry, creating significant disruptions in supply chains, emerging market shifts, and technological challenges worldwide. As the trade war escalates, the global EV sector finds itself at the heart of a rapidly changing economic landscape.

Disrupted Supply Chains and Emerging Markets

The new tariffs imposed by the US on goods from mainland China have dramatically impacted global EV production. The United States has levied a 30% tariff on imports from China, with a staggering 102.5% tariff specifically on Chinese-made EVs. This disruption has forced many EV manufacturers to reassess their supply chain strategies and look for alternative production hubs.

Countries in emerging markets such as Malaysia and Vietnam have seen a surge in EV manufacturing as companies seek to sidestep the tariffs. While this relocation offers opportunities for economic growth in these nations, it has placed considerable pressure on local infrastructure and labour markets, potentially leading to inefficiencies and higher production costs.

Challenges to EV Sales and Production

The trade war’s impact is being felt in the global sales and production of EVs. According to S&P Global Mobility, global light-vehicle sales are expected to drop by around 793,000 units in 2025, with a peak decline of 1.05 million units in 2026 due to the ongoing trade tensions and tariffs. This decline is expected to significantly affect the overall growth trajectory of the EV sector.

Technological Decoupling and Innovation Setbacks

The trade war is also causing divisions in the EV technology space, forcing companies and countries to make difficult choices about which technologies to adopt. The fragmentation of global supply chains is complicating the development of new EV technologies and could slow innovation in the industry, delaying advancements in battery technology and other key areas crucial to the sector’s growth.

Shifting Policies and Market Responses

In the United States, the expected rollback of emissions standards and fuel economy regulations under the Trump administration is further reshaping the EV market. These changes will likely slow the transition to battery electric vehicles (BEVs), with the US BEV mix now projected to reach just 30% by 2030, down from earlier projections of 40%.

Meanwhile, the European Union is considering implementing tariffs on Chinese-made EVs in an effort to protect its domestic industry. Given that the EU is China’s largest overseas market for EVs, this move could significantly impact both European and global EV markets.

Opportunities Amidst Uncertainty

Despite the challenges, experts see potential opportunities in this turbulent landscape. Quentin Willson, a motoring expert, suggests that the tariffs could encourage Chinese automakers to establish manufacturing plants in Europe, leading to increased local production of EVs and batteries. This shift could help reduce emissions from importing Chinese EVs and create more jobs within the European EV sector.

Conclusion

The US-China trade war has reshaped the global EV industry, creating disruptions in supply chains, shifting manufacturing hubs, and complicating technology choices for EV companies. While the situation presents numerous challenges, it also offers new opportunities for growth in emerging markets and the potential for increased domestic production in regions like Europe. As the situation evolves, EV manufacturers, policymakers, and suppliers must stay adaptable and proactive in navigating the changing global trade landscape.